The U.S. Fifth Circuit Court of Appeals has issued a temporary halt to legal proceedings in a case challenging a Biden-era rule that permits pension fund managers to consider ESG factors in investment decisions.
In a court order issued on 28 April, the federal appeals court granted a 30-day pause following a request from the Department of Labor (DOL), which is now under the Trump administration. The agency signalled it is reconsidering the contested rule and may move to rescind it.
The Fifth Circuit, based in New Orleans, approved the Department’s motion for abeyance but made clear the delay would not be indefinite. The court directed the DOL to provide an update by 28 May, outlining whether it intends to maintain or revoke the rule.
The case was initially brought by 26 Republican state attorneys general in opposition to the regulation, which they argue violates the Employment Retirement Income Security Act of 1974. Their legal challenge follows a September 2023 ruling by Northern District of Texas Judge Matthew Kacsmaryk, who dismissed the case in favour of the Labour Department. That decision relied on the Chevron Doctrine, a legal precedent that has since been overturned.
Following the Chevron reversal, the case was returned to Kacsmaryk for reconsideration, though it has remained on the appellate docket as litigation continues. The plaintiffs include the 26 state attorneys general and Liberty Energy, a public oilfield services company.
The Labour Department, in its 21 April motion, argued that a pause would “greatly conserve the litigants’ and the court’s resources,” especially if it opts to repeal the rule, which would eliminate the basis for further legal proceedings.
This development reflects broader shifts under the new administration, which has taken steps to roll back federal support for ESG-aligned investing. A formal rescission of the rule would represent a major policy reversal and significantly impact how pension funds integrate ESG considerations going forward.
